CAIRO - Egypt's finance minister said on Tuesday local lenders had nearly reached the maximum they can lend to cover the country's budget deficit and the government will now have to seek funds from abroad. Egypt is due to begin talks this week with the International Monetary Fund, four months after it turned down a $3.2 billion deal offered by the Washington-based institution in the summer. It has also been seeking funds from Gulf countries and other international lenders. "Our borrowings from the local market are big, and have reached levels that I can almost say are more than the limit," Hazem el-Beblawi told a seminar on the economy. He said the price of treasury bills had been increasing and that the government had often been forced to cancel tenders because demand was weak. The average yield on 91-day T-bills rose to above 13 per cent at the end of September from just over 11 percent in April. "This is a serious burden. But it is not only serious because the government will pay sums this year and next, but because it prevents banks from performing their primary duty of financing the economy," Beblawi said. Egypt's economy was pummelled by the uprising early this year that prompted a sharp downturn in tourism and an exodus of foreign investors. Consultancy firm Geopolicity said in a report last week the uprising had cost the economy $9.97 billion up to September. When Egypt turned down an IMF facility over the summer, the finance minister at the time said the army had not wanted to build up debts. Beblawi took over the ministry in July. Economists said at the time that the government would most likely have to return to the IMF. Analysts said it was now probably preparing public opinion for a change in policy. Many Egyptians are suspicious of borrowing from a Western-backed organisation for fear that there are hidden political conditions attached. Beblawy said Egypt's budget deficit in the year that began in July was an estimated 27-28 per cent of total expenditure, a figure he said was likely to grow by the end of the year. Some 33 per cent of total spending went toward subsidies and another 22 per cent toward interest payments on Egypt's debts, which meant that 55 per cent of the budget was out of the control of the Finance Ministry, he added. "Financing the deficit from foreign resources not only ensures the soundness of the budget, but also reduces the pressure on the balance of payments," he said.
